Killeen Belton Georgetown Marble Round Rock Falls Cedar Park Austin Wimberley Bastrop San Marcos Lockhart Population (2017): 2.1 million Population growth (2010-17): 22.5 percent (Texas: 12.1 percent) Median household income (2017): $73,800 (Texas: $59,206) National MSA rank (2017): No. 31* Kauffman Startup Index rank (2017): No. 2* Amarillo At a Glance Plano Irving Lubbock Dallas • Austin’s political and educational influence Fort Worth arose from its position as the state capital and El Paso Longview home to the University of Texas. Midland Arlington Tyler • Today, the region is a major high-tech hub for both Odessa Round Rock The Woodlands the state and the U.S. and home to numerous New Braunfels Beaumont large and small technology companies. Port Arthur • Fueling Austin’s rapid economic expansion is its Austin young and well-educated workforce. Houston San Antonio Sugar Land • Austin’s employment growth remains solid, although very tight labor markets threaten to Edinburg constrain growth in the near term. Mission McAllen *The Austin–Round Rock metropolitan statistical area (MSA) encompasses Bastrop, Caldwell, Hays, Travis and Williamson counties. The Kauffman Startup Activity Index, a measure of business creation in the 40 largest U.S. metropolitan areas, is further explained in the appendix. Austin–Round Rock: Government and High Tech at the State’s Center HISTORY: A Government, Education expand the economic base and by a fl ourishing re- and Technology Hub search program at UT, major technology fi rms such as Austin was established in 1839 as the capital of the IBM, Texas Instruments and Motorola began locating in Republic of Texas. Th e city became the westernmost the area in the late 1960s and early 1970s. Austin grad- railroad station along the Houston and Texas Central ually emerged as a high-tech center. Of the 108 largest Railway in 1871, and with no other railroad towns for employers in the area in 2016, 56 were high-tech fi rms.2 miles in most directions, it became a trading center.1 Austin’s status as Texas’ political center remained uncertain until 1872, when the city was chosen as the INDUSTRY CLUSTERS: Hotbed permanent capital in a statewide referendum. In 1881, it for High Tech was selected as the site for the new University of Texas. Cluster concentration is measured by location quo- Oil-boom growth in the early 20th century largely tients (LQs), which compare the metro-area and U.S. bypassed Austin, and the city fell from its fourth-place economies. Growth in a cluster is measured by the per- population ranking in Texas in 1880 to 10th place in centage-point change in its employment share between 1920. Completion of two dams in the early 1940s greatly 2010 and 2017.3 aided the area’s subsequent growth. Chart 2.1 displays the composition of industry Expansion of Austin’s key education and govern- clusters in Austin–Round Rock. Th e top two quad- ment sectors supported the region in the 1950s and rants—“mature” and “star”—display industry clus- 1960s. Buoyed by chamber of commerce eff orts to ters with a larger share of employment relative to the Chart 2.1: Austin Thrives as a High-Tech Hub 4.5 Mature Star 4.0 Computer Information technology 3.5 manufacturing and telecommunications 3.0 Business and 2.5 financial services Publishing and Defense and 2.0 Government Education information security Recreation Energy and 1. 5 mining Location quotient in 2017 1. 0 0.5 Advanced materials Food services 0.0 Biomedical Construction Transitioning Emerging –0.5 –3.0 –2.5 –2.0 –1. 5 –1. 0 –0.5 0.0 0.5 1. 0 1. 5 2.0 2.5 3.0 3.5 Percentage-point change in employment share, 2010–17 NOTE: Bubble size represents cluster share of metropolitan statistical area employment. SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors' calculations. Section 2: Austin—Round Rock 11 nation (LQs exceeding 1). These clusters are vital to the As the state capital and home to the flagship UT metro-area economy and can be expanding relatively campus—a highly regarded research institution—Aus- rapidly (star) or growing relatively slowly (mature). tin’s government and education sectors are large. Both Clusters shown in the bottom two quadrants—such as the federal and state governments and the university advanced materials and biomedical—are smaller rela- are top area employers. tive to the nation (LQs below 1). These less-concentrat- Other concentrated clusters include publishing and ed clusters are labeled either “emerging” if they are fast information, defense and security, energy and mining, growing or “transitioning” if they are slow growing. and business and financial services. The defense and The underpinnings of Austin’s economy are gov- security sector nearly doubled in size from 2010 to 2017, ernment, education and the technology industry. making it the fastest-growing cluster in terms of job Computer manufacturing boasts nearly four times growth and complementing both UT and the signifi- the concentration in Austin than in the U.S., reflecting cant technology presence in the region (Chart 2.2). The the significant presence of manufacturers of personal transportation and logistics, agribusiness, and business computers and related goods and services such as Dell, and financial services sectors take the following three Apple, Advanced Micro Devices and Applied Materials. spots among rapidly growing clusters. Dell, with 13,000 local workers, and Apple and IBM, Food services is important to the local economy, each with 6,000 employees, are among the area’s larg- and along with recreation services, this cluster high- est employers.4 Additionally, a sizable footprint from lights the tourist draws of such events as Austin City numerous hardware, software, computing and systems Limits and South by Southwest (SXSW). An Austin design companies—including tech giants Samsung, slogan, “Live Music Capital of the World,” is a nod to the Intel and Hewlett-Packard—make the concentration of numerous live music venues. Austin’s information technology and telecommunica- The health cluster, which employs 8.7 percent of tions cluster 2.5 times that of the nation.5 Austin’s workforce, has also grown significantly in Chart 2.2: Austin Job Gains Led by Defense, Business Services and Transportation Clusters Defense & security (4.9%) 95 Transportation & logistics (1.5%) 77 Agribusiness (0.6%) 69 Business & financial svcs (13.4%) 62 Construction (5.8%) 52 Transportation equipment mfg (0.1%) 50 Food svcs (10.0%) 49 Information technology & telecom (11.6%) 42 Recreation (3.4%) 41 Wood products (0.9%) 39 Textiles (0.2%) 38 Chemicals (0.8%) 38 Glass & ceramics (0.3%) 38 Publishing & information (2.3%) 35 Health svcs (8.7%) 32 Total 30 Utilities (0.2%) 29 Retail (10.6%) 27 Energy & mining (6.6%) 25 Electrical equipment mfg (0.2%) 24 Machinery mfg (0.4%) 20 Primary metal mfg (0.0%) 18 Fabricated metal mfg (0.4%) 17 Computer mfg (2.6%) 11 Education (9.7%) 9 Biomedical (0.8%) 8 Advanced materials (2.7%) 6 Government (8.4%) 0 0 10 20 30 40 50 60 70 80 90 100 Percent change in employment, 2010–17 NOTES: Percent change in employment is shown in whole numbers. Each cluster's share of jobs is shown in parentheses (rounded to one decimal place). SOURCES: Texas Workforce Commission; authors' calculations. 12 Federal Reserve Bank of Dallas Table 2.1: Annual Earnings in Austin Higher than U.S. Average in Several Dominant Clusters Cluster Austin U.S. 2010 2012 2014 2016 2017 2017 Computer manufacturing 134,849 134,613 127,210 137,120 141,034 120,226 Information technology and telecommunications 110,531 110,169 104,068 110,332 115,479 106,629 Business and financial services 90,174 90,887 91,559 97,649 99,067 100,785 Defense and security 86,112 88,731 93,620 105,400 107,064 91,226 Publishing and information 81,350 79,867 83,672 82,886 87,536 96,127 Food services 18,277 18,724 19,164 20,393 20,847 18,963 Construction 52,051 52,445 55,686 59,481 60,828 60,742 Government 57,686 57,398 60,279 62,491 62,749 60,568 Energy and mining 88,610 90,357 87,958 91,692 93,701 80,900 Education 45,912 42,576 44,937 46,272 46,589 49,322 Clusters with location quotient > 1 70,689 71,949 72,915 76,727 78,638 – Clusters with location quotient < 1 53,813 51,373 51,900 54,111 53,946 – Average earnings (total) 55,013 55,501 56,118 58,497 59,742 55,375 NOTES: Clusters are listed in order of location quotient (LQ); clusters shown are those with LQs greater than 1. Earnings are in 2017 dollars. SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors' calculations. recent years. The second- and third-largest private DEMOGRAPHICS: Young, employers in the city are the Seton Healthcare Family, Highly Skilled Talent Pool with 10,270 employees, and St. David’s HealthCare, with The Austin metro area’s strength is its young and nearly 8,600 employees. The summer 2017 opening of well-educated workforce—its median age is 3.5 years the Dell Seton Medical Center, a significant component below the U.S. median. The area ranks No. 1 in college of the new Dell Medical School at UT, has also expand- education among the major Texas metros (Chart 2.3). ed opportunities for health care workers in the area. Austin placed eighth on the list of the most-edu- Though the concentration of health industry employ- cated U.S.